International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

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Volume 8 Issue 4
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Financial Inclusion, Technology, Governance, and Economic Growth: An ARDL Bounds Testing and Error Correction Analysis

Author(s) Mr. Aditiya Dhiraj Barnwal, Dr Manisha Sharma
Country India
Abstract This study investigates the long-run and short-run dynamics linking financial inclusion, digital technology, institutional governance, and economic growth using annual time-series data for the period 2004–2023. Three composite indices—a Financial Inclusion Index (FI_INDEX), a Technology Index (TECH_INDEX), and a Governance Index (GOV_INDEX)—are constructed via principal-component-informed normalisation and integrated into a dual-equation ARDL framework estimated with the Pesaran et al. (2001) bounds testing approach. The growth equation (LNGDP as dependent variable) yields an F-statistic of 3.63, failing to clear the upper critical bound at conventional significance levels, indicating an absence of robust long-run cointegration between economic growth and the selected regressors over the sample horizon. By contrast, the financial inclusion equation produces an F-statistic of 12.05 (p < 0.001), decisively rejecting the null of no cointegration. The associated error correction term is estimated at −0.887 (p < 0.001), implying that approximately 88.7% of short-run disequilibrium in financial inclusion is corrected within a single year—a remarkably rapid speed of adjustment. Diagnostic tests confirm the absence of serial correlation, and CUSUM stability tests support structural stability in both specifications. These findings underscore that financial inclusion is fundamentally a structural outcome shaped by digital infrastructure and governance quality rather than an autonomous short-run catalyst for growth. Policy implications point to the centrality of investments in broadband connectivity and mobile financial services, alongside institutional reforms that improve regulatory quality and government effectiveness, as preconditions for deepening financial inclusion.
Keywords financial inclusion, economic growth, ARDL, error correction model, digital technology, institutional governance, bounds testing
Published In Volume 8, Issue 3, May-June 2026
Published On 2026-06-06
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E-ISSN 2582-2160
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CrossRef DOI prefix of IJFMR is 10.36948/ijfmr

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